The European Union (EU) on Thursday will seek agreement on ground-breaking rules for regulating crypto assets as the rout in bitcoin piles pressure on authorities to rein in the sector.
Globally, crypto assets are largely unregulated, with national operators in the EU only required to show controls for combating money laundering.
A deal would put the EU ahead of the global regulatory pack by giving issuers of crypto assets and providers of related services a “passport” to serve clients across the EU from a single base, while meeting added capital and consumer protection rules.
Industry officials say clarity on rules and passporting could attract crypto firms from rival London. The United States and Britain, two crypto centres, have yet to approve similar rules.
Representatives from the European Parliament and EU states meet to thrash out a deal on the markets in crypto assets (MiCA) law, which would come into force around the end of 2023.
A source involved with the talks said three issues remained: non-fungible tokens (NFT), supervision, and energy consumption.
A deal is likely to focus on including only token-like NFTs in the scope of MiCA, with authorisation and supervision of crypto firms at member state level. The European Commission would assess the energy footprint of crypto assets, the source said.
Firms operating in an EU state would have 18 months after the start date to get a MiCA licence without disruption to service.
Crypto assets came under pressure after the collapse of TerraUSD and luna tokens last month, with major U.S. cryptocurrency lending company Celsius Network this month freezing withdrawals and transfers.
Bitcoin collapsed this month to around $17,600, and is currently trading around $20,100, well below its late March level of $48,200, leaving investors nursing losses.